The Confident Indie Blog

Who’s the boss? More about husband-wife businesses.

My husband and I are trying to start a writing/editing/design business. Right now, we’re intending this to be a side business, something we enjoy and can use to supplement our income. (Who knows what the future holds?) My husband and I work very well together and tend to make decisions together.

I know you recommend sole proprietorship with one spouse as the owner and the other as an employee – for tax purposes. However, because one person does not actually play the role of boss (we are partners in just about everything we do), we don’t think sole proprietorship is the best option for us. Our understanding is that a sole proprietorship requires one primary decision maker who is “the boss.”

1) Do you think our thoughts on sole proprietorship are misinformed or accurate?

2) Would you recommend a general partnership or LLC (or sole proprietorship) for a couple in our position?

Thank you!
Jennifer
Goodyear, Arizona

Hi Jennifer,

A sole proprietor means one person (sole) is the owner. An employee may do less, more or the same amount of work as the owner. The owner is the responsible party. That does not mean opinion, counsel, advise can not be solicited from the employee, or even that the employee make that specific decision because of his or her particular skill.

If you and your husband find no element of your business that places one or the other as the more experienced or responsible party then do not set up an employer/employee relationship. Know that, in doing so you are giving up many tax benefits, so analyze carefully.

Your choice would be one business treated as a “qualified joint venture.” In layman’s terms this simply means splitting the business, in your case, down the middle. Your accountant would do that for you when she prepared your tax return. In this way you avoid the paperwork and various costs of setting up a partnership. States may handle this differently.

Regarding an LLC: I say, as I’ve said many times on my site and in my books, an LLC is not a tax entity. It is a legal entity. You can be a sole proprietorship LLC or a partnership LLC, even a corporate LLC.

I read Self-employed Tax Solutions from cover to cover in about 3 days (I finished it today), and found it engaging and well written. That’s high praise for a book on taxes. I’ve read other tax books ……Paul Plamondon

I really enjoyed reading your book. So many other [tax books] were too technical, very lengthy and downright boring. You injected your sense of humor and put everything in layman’s terms. I refer to y…Ephraim Schum

I purchased a couple of books re: self employment taxes. I like yours (Self-employed Tax Solutions) because it’s written in plain language. The JK Lasser book (Small Business Taxes) appears to be writ…Linda Gordon

I recently bought your book, and wanted to tell you what you already know – it’s terrific. So many great common-sense features. In addition to my “indie” business, I’ve also been a tax preparer for an…James M. Beidler

I just purchased your book Self Employed Tax Solutions, and let me start by saying this is the first time I have written an email to an author. I’m only in the third chapter and am so happy about the …Dean Iodice